Eric Dynowski

The Three Letters That Could Change Your Small Business: API

Today’s business owners are incredibly tech savvy. They use cloud-based applications, run their small businesses from mobile devices and track the return on revenue of every advertising dollar with online dashboards.

Many can even update their own websites, tweaking code when necessary. But even with this level of sophistication, most entrepreneurs are missing out on what might be the biggest opportunity they have to expand their small businesses, an opportunity expressed in just three letters: API.

An application programming interface or API is a piece of computer code that allows different software applications and databases to easily communicate with one another. The API is like a power outlet, which connects two parties (the utility and the consumer) and generates value for both. Put simply, an API allow one business to plug into the value that was created by another.

When a lamp is plugged in to an outlet, the appliance can immediately stream energy generated by the utility. This provides value to the user, in light to read by, and to the utility, in revenue for delivered energy.

This two-way ability to generate value is why an API is such a powerful business growth driver.

APIs are behind the explosive growth of some of the world’s leading startups. Look at Twitter. Individuals and corporate communications folks seem to love communicating 140 characters at a time, but it’s the larger ecosystem of complementary applications and services that have powered its growth. In fact, many users never even log onto Twitter: They use more powerful third-party apps like HootSuite, Tweetbot and Sprout Social. These third-party apps connect to Twitter through its API.

Ride-sharing service Uber is another startup turning to its API for growth. By opening its API to complementary companies such as TripAdvisor and OpenTable, Uber is extending its reach to those companies’ customers, making it easy for them to book a ride when they plan a night out on the town.

Thankfully, a small business doesn’t have to be a high-flying startup to leverage the power of the API as a powerful growth driver. According to Jason Taylor, chief innovation strategist at Usablenet, many businessesuse APIs to save significant time and investment and contribute to competitive differentiation.

So if APIs are the future for growth, what are some ways a business can start using them? Here are three examples:

1. Create fresh distribution networks.

The ecommerce industry is very competitive. Lining up new customers can be incredibly expensive, even when using efficient avenues like Google AdWords. A small business that sells products online, particularly ones focused on a particular niche, can use an API to make it easy for related blogs and websites to become new sales channels, giving the staffers who run those sites the pricing, inventory and product information they need to turn their readers into buyers.

2. Let customers serve themselves.

Consider a logistics company. It has a fleet of trucks moving across the country and a network of warehouses. Its internal systems can track in real time the location of shipments and report where there’s excess capacity. But the only way for customers to gain that information is by contacting the customer service department.

This is resource intensive for the business owner, not to mention potentially annoying to the customer, whose need for information might fall outside of normal business hours. With an API, that company could have a customer portal that pulled its internal system’s data without customer service staff becoming involved.

3. Launch new services.

The trade magazine publishing industry is struggling, but many of these publishers have a veritable gold mine of industry data — information that other companies would pay for in order to access and analyze for trends. One real-world example is my client, Vance Publishing, which has an immense database of agricultural market data that’s been built up over many decades.

Vance is building an API that will make its complete database — until now gathering dust — available to trading firms, farmers, food companies and others who could use it to make better business decisions. This represents a significant new revenue opportunity without a corresponding increase in product development or staff costs.

Just less than 15 years ago business owners wondered if they really needed a website. Why have a website when they had a listing in the phone book? It didn’t take long for them to realize that the Internet had staying power and hanging out an online shingle was vital. The same discussion occurred with the rise of social media, cloud computing and smartphones. Is there really any doubt that there will be a similar level of ubiquity and familiarity with APIs?